Our Outlook on 2019
According to Managing Director Chris Rogers, ADG investors in 2019 will be focused on companies that provide independent aftermarket support, advanced materials expertise, specialized outsourced services, innovative software, and cutting-edge technologies with defense applications. See his complete comments on the 2019 outlook for ADG.
What We’re Reading
In this January edition of our Aerospace, Defense & Government Services industry update, we review recent articles and developments impacting our target end markets. We also provide perspective on recent trends within the public markets as well as the M&A markets.
Private Equity Ramps up Aftermarket Investment
“A hectic year in the aviation aftermarket has culminated with a flurry of investment activity spearheaded by private equity players. This week alone saw the re-purchase of StandardAero by Carlyle and the revelation that a consortium of investors is preparing to buy European MRO provider Sabena technics from long-term owner TAT.”
Investing in the Aviation Maintenance Workforce
“As demographic shifts and an increasingly competitive labor market impact the business aviation maintenance workforce, companies must invest in their talent to keep up.”
Five-Year US Defense Spending Surge Hits Turbulence
“An ambitious U.S. military modernization program fueled by five years of unchecked spending growth is about to collide with a rising backlash from the White House and a new Democratic majority in the House to slow the pace of spending growth.”
Commercial Tech Disruption Just Beginning in GovCon Market
“Several touchpoints came out of the government during 2018 to signal agencies are ready and also being pushed to modernize their technology infrastructures by increasing their reliance on commercially-available tools.”
Perspective on Public Marketsa,b,1
Stock Price Performance – Last Twelve Months
Most Significant Stock Price Movement – November 30th to December 31st
YoY EPS contraction and declining margins driving downward pressure on price
Uncertainty due to government shutdown driving sell-off of last month’s largest positive mover
Tightening credit market has created complications for a potential buyout by Apollo Global Management
Recent M&A Transactions2
Aerospace Supply Chain & Aftermarket Support: AIR, ARNC, ATRO, B, BBA, DCO, ESL, HEI, HRX, HXL, KAMN, MAL, MGGT, MOG.A, ROLL,
SAF, SNR, SPR, TDG, TGI, WAIR, WWD
Diversified Industrial: AME, CR, CW, ETN, GE, HON, PH, RR, TXT, UTX
Defense Prime Contractors: BA, BAE, EADS, GD, HO, HII, LMT, NOC, RTN
Defense Technologies: AVAV, CHG, CMTL, COB, CUB, ESLT, FLIR, HRS, KTOS, LLL, MRCY, TDY, ULE
Government Services: BAH, CACI, EGL, KEYW, LDOS, MANT, SAIC, VEC
Diversified Services: ACM, BAB, FLR, GIB, ICFI, JEC, KBR, SRP
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